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"To meet expected demand, increased flexibility needed in financing capital projects for airports"

Thursday, May 10, 2007

To meet expected demand, increased flexibility needed in financing capital
projects for airports  
By Rep. Eddie Bernice Johnson (D-Texas)  

According to the Federal Aviation Administration, by 2015, one billion
passengers will board planes domestically each year; whether our nation's
airports can handle this projected demand will depend on how money is
invested in aviation infrastructure today.

Airports need to respond to these looming capacity strains by building
facilities that will ensure safe, secure, comfortable and environmentally
compliant facilities for air travelers.

An assessment of airport capital needs was conducted by Airports Council
International - North America based on an exhaustive survey of U.S.
airports. The results indicate that total airport capital development costs
for all airports are approximately $17.5 billion per year from 2007 through
2011, in current-year dollars. This represents a 19.5 percent increase in
annual capital needs from a similar survey conducted in 2005 for the period

The FAA's Passenger Facility Charge Program was first authorized in 1990.
Since then, passenger facility charges (PFCs) have become a cornerstone of
airport capital programs. Since the introduction of PFCs, airports have
funded over $50 billion in capital projects. Projects eligible for PFC
funding include new runways, taxiways, aprons and certain public and
nonexclusive areas of terminals. Yet, the PFC ceiling has not been adjusted
for inflation since 2000, resulting in a drastic loss in value.

FAA recently recommended that the PFC ceiling be adjusted to $6, from the
current $4.50. Airports within and outside of my congressional district have
expressed concern that the current figure does not adequately account for
the loss of value due to construction-cost inflation. In fact, data shows
that due to spikes in construction cost inflation, today's $4.50 PFC is only
worth $2.86.

In order to recapture this lost value, it is my view the PFC ceiling should
be adjusted and indexed for inflation. Moreover, I also am in favor of the
expansion of PFC eligibility for projects such as intermodal connection
facilities. The additional PFC funding and project expansions will allow
airports to begin new construction projects to accommodate additional
airline passengers and service, promote competition, and create good-paying
construction jobs that will help stimulate local economies.

The statute could be amended to allow airports to charge the PFC adjustment
in 25-cent increments so that they have flexibility to better match the PFC
level to local needs.

It is important to note that an adjustment in the PFC ceiling does not mean
that all airports will implement a PFC at the highest authorized ceiling. Of
large and medium hub airports, 25 percent have not implemented a $4.50 PFC,
while 35 percent of small-hub airports remain below the ceiling. Airports
have acted responsibility, requesting FAA approval for PFC funding that
matches the costs of the projects planned to benefit airline passengers.

Without the PFC, financing these projects would have been much more
difficult, if not impossible, to undertake, which means your constituents
wouldn't be able to benefit accordingly. Thus, increasing the PFC is
important not only from a national perspective, but from a state and local
perspective as well.

Furthermore, PFCs also play a vital role in providing significant funding
for small and general aviation (GA) airports. This is because when large
airports utilize PFCs to fund improvement projects, they turn back Airport
Improvement Program (AIP) passenger-entitlement funds, which are dedicated
in part to small and GA airports. In fact, the PFC turnback currently
provides GA airports with one-third of their federal airport funding

The challenges before us are real, and we're going to have to take a hard
look at flexible policies during the FAA reauthorization debate that will
enable our nation's airports to prevent a looming gridlock of our nation's
aviation infrastructure. We must act now.

Johnson is a member of the Transportation and Infrastructure Committee's
Aviation Subcommittee and Chairman of the Water Resources and Environment

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